Relative to worldwide combined reporting for unitary businesses under the business profits tax.
The implementation of worldwide combined reporting is expected to have an indeterminable fiscal impact on both the General Fund and the Education Trust Fund. This approach includes foreign corporations within the tax base, thus counteracting advantages previously granted to foreign-based companies. The change could restore a level playing field for local businesses against larger multinational firms operating in the state. However, the New Hampshire Department of Revenue anticipates challenges in determining tax liabilities due to the complexities of foreign income and asset reporting.
House Bill 121 (HB121) proposes a significant shift in New Hampshire's taxation approach by moving from the current water's edge combined reporting method to worldwide combined reporting for unitary businesses under the Business Profits Tax (BPT). This change aims to address the taxation of large multinational corporations and ensure that all entities, regardless of their headquarters' location, are treated equally in tax assessments. The bill is in response to historical changes made in the 1980s that favored foreign corporations over local businesses by allowing profit shifting to tax havens, which has created an inequitable tax environment for New Hampshire companies trying to compete.
The sentiment surrounding HB121 appears to be in favor of restoring fairness in the business tax system. Supporters argue that the bill will help prevent the manipulation of tax obligations by emphasizing the need for a more comprehensive evaluation of multinational corporate operations. Detractors from previous provisions express concern that returning to a more encompassing reporting method may complicate tax administration and compliance for both businesses and the state. Nevertheless, the drive for fairness and equity in taxation prevails in discussions about the bill.
Notable points of contention arise regarding the change from the water's edge to worldwide reporting. Some lawmakers and business advocates worry about how these changes could be implemented practically, considering the administrative burden this may place on the Department of Revenue. Concerns about accessibility to foreign entity records and the conversion of foreign currencies into US dollars also feature in discussions. Additionally, there is apprehension over potential winners and losers arising from the different impacts this tax method might have on various business entities as it relates to their global operations.